With talks of a recession, experts say hostile acquisitions are expected to rise, as well-positioned companies take advantage of the slumping stocks of targets.
As evidenced by news of Microsoft's hint at a proxy battle to acquire Yahoo, and the most recent news of United Technologies' rejected bid to buy voting-machine company Diebold, it appears bidding companies are seeking to strike while the iron is hot.
And even before the recession became a major concern, proxy battles were up, according to a Brunswick Group report. By August of last year, there had been 102 proxy fights in 2007. In 2006, there were 99 in the entire year. In 2005, that figure was 55.
For communications experts on both sides, the strategy behind contests for control should develop well before the two companies meet on the financial battlefield.
Communicators for the target company need to act as sort of consigliere - reaching out to shareholders, employees, and suppliers when the target company's board is acting correctly, but also telling the board when they're in the wrong.
"Sometimes the role of communications is to make sure that the board and management understand that they have vulnerability," says Lissa Perlman, partner at Kekst and Company, with more than 23 years' experience consulting on M&As. "They're sort of the mirror, the kid who has to tell the emperor that he has no clothes. And that's very important in an environment like this."
Externally, communicators for targets also become heavily involved in telling the company's corporate story, and ensuring that the company is communicating with all of its stakeholders, including investors.
"If shareholders see that management are good stewards of the company, and they have been, they will give management credit for that and that can be very important in the fight," says Steven Lipin, senior partner of Brunswick Group. The firm has a long relationship with Google, but Lipin only spoke in generalities about acquisition battles.
He adds that communicators for target companies must illustrate this through IR and organizing face-to-face meetings.
"These are the things you [do] regardless of whether you get hit with a bid," Lipin notes. "Hostile bids are a tactic. These fights are about articulating the value of a company. Do investors understand the story?"
For the company looking to acquire, such as Microsoft, communications is no less difficult. Microsoft has to be able to woo shareholders into replacing Yahoo's board without exposing its own weaknesses or risking damage to its reputation. Neither Microsoft nor Yahoo returned calls for comment.
"Personal performance and character are a component, because it's vital when you're trying to convince somebody to get behind you," Perlman says. "If you become shrill and militant [or] too hostile and too aggressive, that can undercut personal credibility."
"Microsoft must 'Hillary Clinton-ize' the debate," notes Frazier Seitel, managing partner at Emerald Partners. "Make it clear that if you settle for what the other side tells you, you'll be worse off. Specifically they should say if you side with the current management ... you'll lose the value we are guaranteeing the second our company takes over."
For Brunswick's Lipin, hostile tactics do sometimes get personal, but he warns that aggressor companies also need to acknowledge the importance of all stakeholders when communicating their intentions.
"Bidders need to be careful to not alienate the people they want on their side," he adds.
To reach all these constituents, aggressors and defenders will often use the press. Still, the battle comes down to value, and, even in the media, a defending company must be able to prove its value with real numbers.
"What people don't understand about PR is that you can't put perfume on a skunk," Seitel says. "[Yahoo] can have the greatest communications guru. They can hire me, and I still wouldn't be able to pull it off if the performance wasn't just as good as the communications."
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